Resource Stocks Drag Australian Market; Financials Gain

By IBT Staff Reporter On 06/18/09 AT 4:21 AM

RTTNews - The Australian stock market ended in negative territory for the fourth consecutive day on Thursday, dragged down by resource stocks on lower commodity prices. However, selective buying in financials helped limit the losses after a RBA report revealed that net interest margin of banks improved from the levels prior to the global financial crisis. Weak trading across the other markets in the region also impacted market sentiment.

In the U.S., mixed performance was witnessed Wednesday as traders digested the sweeping proposals of President Obama to revamp the financial sector.

A report released by the Labor Department on consumer prices revealed that the prices edged up 0.1% during May after coming in unchanged in April. However, the increase was less than economists' mean expectation of a 0.3% rise in consumer prices. Core consumer prices, which exclude food and energy prices, also edged up 0.1 percent in May following a 0.3 percent increase in April. The modest increase in core prices came in line with economist estimates.

In other news, the Federal Reserve continued its treasury buyback program Wednesday, completing its second quantitative easing move of the week. The New York Federal Reserve purchased $7.0 billion worth of securities with maturity dates ranging from May of 2016 to May of 2019.

President Obama laid out a sweeping agenda for regulatory reform in an effort to prevent a recurrence of the financial meltdown that sunk the U.S. economy into a recession. He proposed granting the Federal Reserve the authority to scrutinize firms that are large enough to pose a systemic risk to the financial markets. He also called for the creation of an oversight council of existing federal regulators to share information, identify gaps in regulation and tackle issues that don't fit neatly into an organizational chart. The President also called for the creation of a new agency dedicated to looking out for the interests of consumers in the financial markets.

While the Nasdaq finished higher by 11.88 points or 0.7% at 1,808, the Dow slid 7.49 points or 0.1% to 8,497 and the S&P 500 dropped by 1.26 points or 0.1% to 911.

The All Ordinaries Index opened unchanged from its previous close at 3,904. Weak cues from Wall Street and concerns about a global recovery dragged the indices below the unchanged line. The index remained below the unchanged line for the bulk of the session before closing at 3,887, representing a loss of 16.80 points, or 0.43%. The benchmark S&P/ASX 200 Index followed a similar trend and ended lower at 3,892, a loss of 12.00 points or 0.30%.

Crude oil prices ended flat with a loss of 3 cents at $71.00 a barrel in Asian trading. Light sweet crude oil finished at $71.03, up $0.56, on Wednesday in New York.

On the economic front, a report released by the Australian Bureau of Statistics revealed that merchandise imports dropped a seasonally adjusted 5% month-on-month in May. Total imports declined to A$16.39 billion from A$17.19 billion in the preceding month.

Separately, a survey released by the Australian Chamber of Commerce and Industry, or ACCI, revealed that business confidence in the country improved in the second quarter. The survey revealed that about 23% of firms surveyed expect improvement in general business conditions, while 27% expect a deterioration. More importantly, half of the respondents expect no change in business conditions.

Westfield Group, which owns shopping centers, gained 1.82% following the news that the company has been in discussion with banks for raising about $1.25 billion as a forward start loan for its future expansion plans.

Financial stocks advanced after a report released by the Reserve Bank of Australia revealed that net interest margin, the key measure of bank's performance, has improved in the first half of fiscal 2010 and is presently higher than the margins that prevailed before the start of the global financial crisis. Commonwealth Bank added 0.98%, National Australia Bank gained 1.47% and Westpac Banking Corp advanced 1.58%. However, ANZ Bank bucked the trend and ended lower by 0.61%.